Politico: Euroclear allowed to keep profits from Russian assets for two years. It's about 5 billion euros

Euroclear, which holds most of the frozen assets of the Russian central bank in Europe, has been allowed to keep the profits earned on these assets in 2022 and 2023. According to the European Commission, the 5 billion euros held by Euroclear is a buffer to pay for current and potential lawsuits in Russia and other countries. However, the Ukrainian side "does not accept this argument," Politico reported on March 26, according to UNN.

Details

"Euroclear, the body that holds the vast majority of the Russian central bank's assets in Europe - immobilized by sanctions when Moscow invaded Ukraine more than two years ago - has been allowed to keep the profits earned from their investment in 2022 and 2023, rather than use the cash to support Ukraine's military efforts," the publication says.

Against the backdrop of Ukraine's need for money for ammunition, the European Commission has proposed using 90% of the profits from frozen Russian assets in Europe to purchase weapons for Ukraine. This is estimated to be worth between 2.5 and 3 billion euros per year.

"But the block is limited to profits accumulated after February 15, 2024, the date when the first part of the legislation was approved by the EU. Profits earned before then will remain in Euroclear, the Brussels-based securities depository," the newspaper writes.

According to the European Commission, "the €5 billion held by Euroclear is a buffer to pay for current and potential lawsuits in Russia and other countries.

"Profits for 2022-2023 related to the Russian stranded assets are separated from the profits of the 'business as usual'," Euroclear said in a written response. - "We are not distributing these profits to shareholders and are retaining them until further notice.

According to the EU's proposal, which has been reviewed by the publication but has not yet been made public, the funds are intended for "costs, risks and losses incurred by central securities depositories...due to the war in Ukraine.

Ukraine, the newspaper writes, "does not accept this argument," and Justice Minister Denys Malyuska reportedly called it a "mistake" during a discussion in Brussels last week.

"I've never heard that 5 billion euros is a buffer for Euroclear," said Maluska. - "That's too much money to be a buffer" for any potential lawsuit.

"Ukrainian officials said that this amount is also inconsistent with the fact that Euroclear has suffered only 34 million euros in revenue losses due to the direct effects of the war, according to the company's CEO, Liv Mostry," the publication says.

However, legal experts noted that the retroactive seizure of profits would be a legal minefield, which explains why the European Commission's proposal does not cover income earned in 2022 and 2023, the publication writes.

"There are very limited circumstances in which regulations can be applied retroactively," said Malyuska, a former lawyer himself.

The legal text contains several other concessions for Euroclear. According to the document, the financial institution can indefinitely retain 3 percent of its revenue "to ensure the efficiency of its work.

In addition to the €5 billion in cash, Euroclear is stated to be able to use 10 percent of profits made after February 15, 2024, as an additional guarantee. The financial institution can ask the EU to supplement this amount as a last resort.

If the legal risks do not materialize by 2027, Euroclear must transfer 10 percent of this "insurance" to the EU, but not the 5 billion euros of profits earned in 2022 and 2023, according to an EU official.